Restrictions on the importation of tomatoes reduce the supply available to the Canadian domestic market.Studies indicate that the demand for tomatoes is elastic.Compared to a free-trade situation,what is the effect of the import restrictions?

Question

Quizplus · Accepted Answer

When there are import restrictions on tomatoes, the supply available to the Canadian domestic market decreases. Since demand for tomatoes is elastic, meaning consumers are sensitive to changes in price, there will be a higher price for tomatoes. This higher price causes a reduction in consumer expenditure on tomatoes as consumers may opt for cheaper substitutes or reduce their consumption of tomatoes altogether. Therefore, import restrictions cause higher tomato prices and a reduction in consumer expenditure on tomatoes in Canada.

Restrictions on the Importation of Tomatoes Reduce the Supply Available